The London office market has seen 42 medium/large pre-lets of office space so far in 2019, totalling 2.5m sq ft, which represents a 20% rise on 2018. With one month to go the 42 pre-lets matches the record from any of the previous ten years. Central London occupiers launching searches further in advance of their planned lease expiries than ever before. Pre-letting has gradually risen in importance and is now accounting for around 25% of London office space being transacted.

Cushman and Wakefield say that pre-letting has historically been an important part of the Central London office market, accounting for 23% of total transactions over 5,000 sq ft between 2009 and 2018. Some 24.4 million sq ft was pre-let across 267 pre-let transactions completed during this period. On average, there were 27 pre-lets each year. The pre-let market will play an increasingly important role in the London office market over the next five years.

Pre-letting has traditionally been more prevalent in the City and City fringe of London than in the West End, with 148 pre-lets and 119 pre-lets, respectively. The average duration between exchange and practical completion was 13 months. Pre-lets for buildings which were under construction, the average duration between exchange
and completion was 9 months.

Many pre-lets tend to involve large-scale occupiers with examples in 2019 including 300,000 sq ft to BT at 1 Braham Street, E1 and 360,000 sq ft to EBRD at Bank Street, E14. This trend has historically been driven by the financial services sector (such as EBRD) taking large pre-lets in the City Core and Canary Wharf. But in the last ten years the most active sector for pre-lets has been the media & technology sector (eg BT in 2019). Followed by banking & financial companies and public & government sector.

Large transactions from several new London market entrants have boosted pre-let volumes in recent years including Apple’s acquisition at Battersea Power Station (475,000 sq ft), Dentsu Aegis’ 312,000 sq ft pre-let at 1 Triton Square and Facebook’s recent signing at King’s Cross (600,000 sq ft).

The City Core has seen the largest volume and the highest total number of pre-let transactions such as Brewin Dolphin and Smith & Williamson, but King’s Cross is becoming a close competitor with virtually all the new office stock pre-let in recent years (Sony Music pre-let 130,000 sq ft this year). In addition, West End submarkets such as White City, Battersea and Nine Elms have attracted pre-lets of a large part of their total stock levels. Stratford has also seen a high level of pre-let activity.

C&W estimate that the total potential size of the development pipeline over the next 5 years is 35 million sq ft, with 10m sq ft already either pre-let or under offer. The prospect is that shortages of completed speculative space could make pre-lets even more popular and a large number of companies are currently at an early stage in London large move searches.